Copyright (c) 2009 All rights reserved. http://works.bepress.com/karl_okamoto Recent documents in Karl Okamoto en-us Thu, 17 Sep 2009 23:40:17 PDT 3600 http://works.bepress.com/karl_okamoto/12 http://works.bepress.com/karl_okamoto/12 Wed, 16 Sep 2009 13:44:24 PDT Karl S. Okamoto http://works.bepress.com/karl_okamoto/11 http://works.bepress.com/karl_okamoto/11 Thu, 11 Jun 2009 06:37:45 PDT This bibliography was first prepared by Peter J. Egler, Interim Head of Research Services at the Legal Research Center of Drexel University's Earle Mack School of Law. It is intended to serve as a tool for the growing discussion of the "legal profession as subject" (also known as the "bug and etymologist" phenomenon). Please send any suggested additions or corrections to ko54@drexel.edu. Karl S. Okamoto http://works.bepress.com/karl_okamoto/8 http://works.bepress.com/karl_okamoto/8 Mon, 03 Nov 2008 09:08:17 PST How do we make our financial world safer? This Article offers a strategy for regulating financial markets to better prevent the kind of disaster we have seen in recent months. By developing a model of risk manager decision-making, this Article illustrates how even "good people" acting in utterly rational and expected ways brought us into economic turmoil.The assertion of this Article is that the root cause of the current financial crisis is systemic moral hazard. Systemic moral hazard poses a unique challenge in crafting a regulatory response. The challenge lies in that the best response to systemic moral hazard is "preventive prediction." It is inherently difficult to reward individuals for producing preventive prediction. Therefore markets fail to produce it at optimal levels, and thus prevent systemic moral hazard and the kind of crisis we are facing.The difficulty in valuing preventive prediction is seen when we model how risk managers make decisions regarding the prevention of excessive risk. The model reveals how the balance can be tipped in favor of risk-taking that leads to systemic failure and broad social harm. The model also reveals how regulation might work to reset the balance to one that is superior for society. We achieve this by imposing two requirements on all asset managers in the market: we require them to put their own money at risk in their trading decisions, and we require them to use "best practices" in managing risk. These prescriptions arise out of a regulatory strategy that accepts the need to balance the benefits of risk-taking in financial markets (and the consequent inevitability of some financial failure) with the desire to avoid excessive risk-taking and the costs of systemic collapse. It is a strategy that focuses on those instances where we cannot trust ourselves to be prudent. Karl S. Okamoto http://works.bepress.com/karl_okamoto/7 http://works.bepress.com/karl_okamoto/7 Wed, 05 Mar 2008 11:37:51 PST Thomas J. Brennan http://works.bepress.com/karl_okamoto/6 http://works.bepress.com/karl_okamoto/6 Tue, 11 Sep 2007 13:33:22 PDT Karl S. Okamoto http://works.bepress.com/karl_okamoto/5 http://works.bepress.com/karl_okamoto/5 Thu, 30 Aug 2007 12:37:29 PDT Karl Shumpei Okamoto http://works.bepress.com/karl_okamoto/4 http://works.bepress.com/karl_okamoto/4 Thu, 30 Aug 2007 12:33:55 PDT Douglas M. Branson http://works.bepress.com/karl_okamoto/3 http://works.bepress.com/karl_okamoto/3 Wed, 29 Aug 2007 12:34:40 PDT In 1991, the Securities and Exchange Commission completed a comprehensive revision of its rules under the short--swing profit disgorgement provisions of section 16 of the Securities Exchange Act of 1934. An important goal of these revisions was to remedy the often confusing and illogical application of the short--swing profit disgorgement rules to trading in derivative securities. By equating transactions in derivative securities with the analogous purchase or sale of the underlying stock, the SEC adopted a unifying and systematic regulatory regime for the treatment of derivative securities trading by corporate insiders.The clarity and simplicity of the new regulations come, however, at some expense. First, the new rules overturn significant court precedent interpreting section 16(b) and its application to derivative securities trading. This raises the critical issue of the SEC's authority under the statute to adopt the new rules. Unlike the broad grant of authority under section 10(b) of the 1934 Act, section 16(b) offers little support for the SEC's wholesale rewriting of the statute's content, especially when the result is to expand the provision's scope. Furthermore, a close examination of the new rules' effect reveals a more fundamental challenge to both their wisdom and the SEC's authority to adopt them. While treating simple put and call transactions as equivalent to the purchase or sale of the underlying stock is compelling, more complex derivative strategies do not offer the same potential for the abuse of nonpublic information. In fact, some are inherently unable to benefit from any informational advantage. Therefore, in adopting the new rules, the SEC has oversimplified. Karl Shumpei Okamoto http://works.bepress.com/karl_okamoto/2 http://works.bepress.com/karl_okamoto/2 Wed, 29 Aug 2007 12:26:26 PDT Karl S. Okamoto http://works.bepress.com/karl_okamoto/1 http://works.bepress.com/karl_okamoto/1 Wed, 29 Aug 2007 12:22:36 PDT Karl Shumpei Okamoto